Public Bill Committee

[Mr David Amess in the Chair]

David Amess: Order. It is obvious that a few colleagues are missing, for all sorts of reasons, but the Committee is quorate, so our proceedings will not be disrupted.

Clause 28

Nia Griffith: I beg to move amendment 74, in clause 28, page 15, line 14, at end insert

David Amess: With this it will be convenient to discuss the following:
Amendment 75, in clause 28, page 15, line 15, after ‘receptacle’, insert ‘, Post Office Branch’.
Amendment 78, in clause 30, page 16, line 33, at end insert—
Amendment 89, in clause 35, page 19, line 44, at end insert

Nia Griffith: It is a great pleasure to serve under your chairmanship again, Mr Amess, even if not everyone has managed to get here. Obviously, we hope that our missing colleagues are not stuck in uncomfortable circumstances.
We are dealing with another set of amendments relating to clause 28, where we left off last time. First I shall discuss amendments 74 and 75 and then I shall discuss the other two. Amendments 74 and 75 relate to subsections (4) and (5) respectively. Maintaining the link between Royal Mail and the Post Office is essential. It is unthinkable that the historic link with our post office branches—be they the bigger branches on our high streets or the smaller ones in corner shops, perhaps in scattered rural areas or less-frequented urban areas—which has existed over so many years should be broken.
There is a good reason why the existing structure of Royal Mail Group includes Royal Mail and Post Office Ltd. That structure is historical, and it integrates in one organisation the two sides of postal services: the collection points where people hand in the items that they want conveyed, if they are anything other than what can be put in a post box, and the delivery service. The modern Royal Mail Group employs 160,000 staff and has two main functions: delivering 70 million letters and parcels a day from post boxes to 28 million households and businesses, and running the network of 11,900 post office outlets.
The idea that anyone would want to separate the mail and the Post Office is unthinkable. In fact, many people are incredulous that the proposed legislation for privatising the Royal Mail would result in there being no direct link between the post office network and the Royal Mail, and that any such link would depend purely on whether Royal Mail happened to choose to enter into an inter-business agreement to use the post office network.
The separation of the Post Office from Royal Mail fundamentally threatens the future of the post office network. The Bill does nothing to guarantee an IBA between Royal Mail and the Post Office, unlike the current situation, whereby the Post Office provides counter services for Royal Mail. Obviously, we understand that that is a commercial agreement; if we had a privatised Royal Mail, it would be an agreement between two private companies, or two separate companies. Therefore it is, as the Minister has said, something that he has not seen, that he is not party to and that he is unlikely to be party to in terms of the finer details. The IBA is not included in the Bill, so when the current IBA ends and is renegotiated, there is no guarantee that Royal Mail will continue to use the post office network as the primary retail outlet for some or all of its products. It will be a strictly commercial negotiation, with no thought of the social consequences.
We could face the surreal situation of a post office network without postal services. It has to be admitted that that would be bizarre—post offices but no postal services. Perhaps post offices would get something from the Department for Work and Pensions, if they were very lucky. Perhaps they would get additional work from the DWP if they were super-lucky. Perhaps they would even keep the green giros, but it would be bizarre if Royal Mail’s services were not linked to the Post Office. Post offices are, after all, the first place most people think of going to post anything other than a normal letter. Off they go, to their nearest branch, with large envelopes, packages and items destined for foreign parts—anything on which they cannot stick just an ordinary first or second class stamp. Where else in the world are there post offices without postal services? People all over the world go to post offices to post items. We have heard fine words from Moya Greene, the chief executive of Royal Mail, and I do not for a moment doubt her sincerity, but people move on and circumstances change.
The National Federation of SubPostmasters is still concerned. It is absolutely desperate to see a minimum 10-year IBA, but it would rather see a longer one. There is no hope of that, if it cannot even get a guarantee of a 10-year one. As the Minister has pointed out, the IBA is a commercial agreement and as such cannot be put into the Bill. We therefore have to find another way for Royal Mail and the Post Office to have a link, and for that link to be guaranteed.

Edward Davey: The hon. Lady has just said something interesting. In rehearsing my arguments, she seems at last to accept that the IBA cannot be put into the Bill. Is that now her position?

Nia Griffith: I would much rather see the IBA in the Bill. The Minister has explained, however, that, as far as he understands it, it cannot be put in the Bill, and so I will suggest another mechanism if that is the case.

Edward Davey: I understand that that is the hon. Lady’s argument, but does she now accept what we have said in the Committee?

Nia Griffith: I would not wish to accept that—not one bit. I would not wish to accept that one cannot change things if one wishes to. What I am saying is that we have been told so many times that we cannot have the IBA in the Bill that we want to consider another way of tackling the problem.
So, what have we come up with? We are trying to find a way in which the link between Royal Mail and the Post Office can be guaranteed. Everyone tells us that that is what they want, and so it seems logical to try to find a way to do it. Post Office Ltd obviously wants that, because it wants its business guaranteed, and Moya Greene tells us that Royal Mail wants it, too. Labour members of the Committee certainly want it, and I believe that the Minister wants to help to secure the future of the post office network, as do many Government Members. I think that they recognise that to secure the network’s future, post offices need to secure business streams; indeed, several of them have mentioned that necessity. At the moment, when there is no guarantee that the Post Office will get a renewal of the DWP contract for the green giros, never mind any additional work from the Department, what on earth would be the point of putting lots of effort into searching high and low to secure new business streams for the post office, if the substantial revenue brought in by the IBA with the Royal Mail, which accounts for a third of the Post Office’s income, cannot be secured?
I thought that I would help the Minister this morning, because he likes to think of names for the amendments. I suggest that this group be called the Christmas cake amendments, because the Conservative and Liberal Democrat parties seem to be trying to find lots of icing and decorations to put on the Christmas cake. In their wonderful glossy blue document, there are wonderful ideas about what the Post Office will look like, with the lovely little local post offices and the computers and chairs that will be moved in. They have all those different little aspects—the decorations and icing—that will make the post offices so absolutely beautiful, but they will take away the cake. There will be no cake, because there will be no Royal Mail IBA on which to base all that.

Edward Davey: The hon. Lady probably does not know that my birthday is on Christmas day. As I thoroughly enjoy Christmas cake, my late mother always used to ensure that my birthday cake was a second Christmas cake. The Government will ensure Christmas cakes are bigger and better than when the Opposition were in government.

Nia Griffith: We would like to see a cake that is the Royal Mail IBA with the Post Office. That is the fundamental bit, because it is a third of the Post Office’s business. We would also like to have a nice thick slice of marzipan, which would be the Government business being channelled through post offices. On top, we would like everything else—foreign currency exchange and all the exciting additional extras—bringing in much more revenue for local post offices that branch out into diversification projects. Without the good cake underneath and a nice layer of marzipan, however, the icing and the little Father Christmases and snowmen on the top will just collapse—I know that from baking cakes. I hope, when the Minister is enjoying his second Christmas cake on Christmas day, that he will be giving considerable thought to that issue.
If the IBA is not in the legislation, as the Minister seems to be indicating, what will the Government do to guarantee that the post office network continues to receive Royal Mail business? I am aware that the Government have not yet come up with how any such guarantee might be made. As ever, we are ready to help the Minister and to propose another way that that might be achieved.

David Wright: The Minister wants to have his cake and eat it.

Nia Griffith: Absolutely. We are proposing two amendments to seek another way to preserve the historical link between the post office network and the Royal Mail. It is a straightforward idea—we simply want to add post office branches to clause 28. The amendments would place an obligation on Ofcom to include post office branches in the provision of access points to meet the needs of users of the universal postal service. By seeking to insist that Ofcom includes post office branches in that way, our intention is to secure the future for the post office network. That future would be secure whatever the will or whim of a future Royal Mail, which might be a privatised Royal Mail or might be one whose chief executive officer or priorities might change.
Unless in the mind of Government there is a desire to break the link between Royal Mail and the post office network at some time in the future, I see no reason why there should be any objection to amendment 74. Refusing to accept it is tantamount to an admission that the Royal Mail may well choose to make different arrangements for access points and move away from using post offices, and that the Government condone that thinking. Therefore, if the Government are serious about their interest in the future of the post office network and about responding to the demand of the National Federation of SubPostmasters for a guarantee of at least 10 years’ custom from Royal Mail, the Minister should accept amendments 74 and 75.
I cannot see any reason why the Minister should not welcome the amendments with open arms. This is his opportunity to be the saviour of the Post Office, which is what he wants to be. If I am not careful, we might start another Christmas theme—about his coming down to save the Post Office.

Gregg McClymont: Can my hon. Friend think of any reason why the Government would not consider access points part of the universal service, in the same way that six-days-a-week delivery and pick-up are?

Nia Griffith: I have been caused considerable puzzlement in trying to understand why one would not wish to have that element in any agreement for our post office network. It seems clear that other countries manage to have agreements covering delivery ends as well as access ends, and that their post office networks are established along those lines in accordance with the legislation. As my hon. Friend has pointed out, if we go down the route of the Bill as it stands, with a privatised Royal Mail working with partners from other countries, we might find that the taxpayer here is subsidising those networks in another country. That seems a crazy idea.

Gregg McClymont: I thank my hon. Friend for beginning to try to solve the puzzle. The Dutch and the Germans have statutory provision for access points—counter services—enshrined in legislation. Is one answer that a buyer of a privatised Royal Mail having to pay for 12,000 post office access points might reduce the sale price for Royal Mail?

Nia Griffith: My hon. Friend is extremely perceptive. What he suggested might indeed be a factor.

Edward Davey: To help the hon. Lady in enlightening the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, when the German Government sold Deutsche Post, they were not worried about any statutory link. Therefore, had that been an issue, we would have learned from the Germans that there was no problem. The hon. Gentleman is absolutely wrong in his analysis.

Nia Griffith: It is fairly unlikely that my hon. Friend could be so wrong, and I am sure that he will enlighten us further in a moment. What is clear to me is that access points are extremely important in the networks in other countries.

Gregg McClymont: Will my hon. Friend confirm that Deutsche Post has to work in a system that includes statutory provision for access points? There are 12,000 access points—post offices—across Germany, because of provision in law. The criteria are similar to those that the previous Government maintained. However, for a privatised Royal Mail, the criteria will be informal, although the Germans have put them into statute, for good reason.

Nia Griffith: Indeed, I can. We should learn the lessons from that and note them. I find it extraordinary that the Minister wants to sign the death warrant of the post office network, when he has the opportunity not to do so. He has the opportunity to save our post offices.

Gregg McClymont: The Minister is confident about the future of the post office network, but we are all aware that the issue is not straightforward. There is clearly an issue with retaining post offices. Given the Minister’s confidence in the future of the post office network, I cannot for the life of me understand why he would not back up that confidence with statutory provision—front up, as Australians would say.

Nia Griffith: The Minister is probably too busy arranging the Santa, the sleigh and the reindeer, and he has forgotten altogether about the cake underneath—but he needs the cake. He is too busy thinking of all the little things that could make post offices look nice, but he has forgotten the fundamental business, which is a real problem. He has to learn about getting back to basics, stirring in the currants and all the wonderful spices that make a Christmas cake, which is the IBA.
The IBA is complex and not simply about using the access points. It is about intertwining all the different ingredients that make it up and that bring considerable revenue into Post Office Ltd.

Damian Collins: Does the hon. Lady not agree that it would be almost unthinkable for the Royal Mail to want to go to sale without a strong IBA in place, securing the retail base? Managers of the Post Office know that they will have such a trump card to play when in the negotiations.

Nia Griffith: If Royal Mail and the Post Office are so determined to work together, what would be the harm in having some such provision enshrined in the legislation? That is the issue. As discussed, everyone’s will seems to be for that to happen. However, at the moment, it could very well be another outlet—an outlet with far fewer branches across the country. We have seen what has happened to banks in local villages—they have all closed, effectively. We have seen what has happened to some of the smaller branches of the big chains—many people have seen local Co-ops close, for example. The problem is that people fear—I certainly do—that without something written down, there is the option to go somewhere else with fewer access points.

Edward Davey: On things closing down, the problem with the hon. Lady’s argument both earlier and today is that she cannot explain why, when the IBA was in place and Royal Mail and Post Office Ltd were in the same group, 7,000 post offices closed in the past 13 years, if such things provide the protection that she claims. Under the previous Government, they failed miserably to provide such protection, so why is she putting such reliance on them?

Nia Griffith: The Minister knows that probably about 4,000 post offices will be commercially viable, and that we introduced access criteria requiring 7,000 or 8,000 post offices to be open to meet those access criteria. He endorsed those access criteria in his document. Not only that, but we put in money to enable 11,900 post office branches to remain open and, yet again, he has chosen to continue that subsidy for the next couple of years. He has actually been following the policies that we laid out.

Gregg McClymont: Is my hon. Friend as struck as I am by what the Minister has just said? The Minister will have been recorded in Hansard as saying that, given that 7,000 post offices had closed, the IBA could not have been that important. But that speaks for the importance of the IBA, because despite the fact that it provides a third of post offices’ income, we still have only 4,000 economically viable post offices. There is a point about the commercial relationship between Royal Mail and Post Office Ltd post-privatisation of the Royal Mail. Royal Mail will be in a much stronger bargaining position than Post Office Ltd. The Minister said earlier that Post Office Ltd will have some bargaining power. I understand that it already provides a service to at least one other postal collection and delivery company, so the notion about vacating its exclusive agreement that Royal Mail is worried about does not stand. Even if that were true, it is redundant, because the other businesses in the market are basically bulk pick-up and delivery.
No other company is a proper letter business. No other company is in that market, and it is unlikely that anyone else for the reasons given by the Minister are likely to be in the last mile. The notion that there will be a commercial negotiation in which Royal Mail, given that it is 10 times the size—it has £10 billion turnover compared with £1 billion turnover—and is the prime player in the business market, will not be in a dominant market position beggars belief.
 Mr Davey  rose—

Nia Griffith: I could not have put that argument better myself. I wonder what the Minister wants to intervene about so keenly.

Edward Davey: The intervention of the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East was so long that I almost forgot why I originally wanted to intervene. Not for the first time, he has completely misquoted our proceedings by suggesting that I do not think that the IBA is relevant. Of course I think that the IBA is relevant. It happens to be an agreement between Post Office Ltd and Royal Mail, not Her Majesty’s Government. In respect of the IBA, given that the same access points and criteria existed under the Labour Government and yet 7,000 post offices closed, why should the protections that the hon. Member for Llanelli says are absolutely needed continue? She has failed completely to answer that question, so we cannot take her seriously.

Nia Griffith: The matter has been explained well by my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East. Royal Mail business is crucial business for the post office network. If there had not been the commitment from the Government to the additional subsidy, access criteria and such business with the Royal Mail, the future for the post office network would have been a lot bleaker. It must be said that we kept a lot more post offices open than were commercially able to be open. The Minister knows that we kept the best part of 7,900 post offices open.

Gregg McClymont: My hon. Friend is as interested as I am in what the Minister is saying. We can all agree on a perfectly reasonable formulation. The IBA is important, nevertheless 7,000 post offices have closed because the economic climate for them is difficult. The Minister has said that he will introduce new ways in which to do business with Post Office Ltd, which will make more post offices viable, but that is not in tension with the view that the IBA is critical.

Nia Griffith: Separating out and not having that vital link between post offices and Royal Mail will exacerbate the problem that post offices already face. Our amendment’s purpose is to put into the legislation the requirement to use post office branches, and, later, we shall discuss specific numbers of post office branches and access points. There are two aspects: wanting to secure that link with the post office network, and the need for a specified number, which will have a tremendous bearing on the consumer.

Edward Davey: So that we can have a constructive debate, will the hon. Lady at least admit that this Bill, compared with the Postal Services Act 2000, strengthens the position regarding access points?

Nia Griffith: I do not want to sound like a stuck record player, for those people who remember what record players were like. However, we have said on a number of occasions that the Bill is different from the previous one, because we are discussing a privatised Royal Mail. What might happen between a privatised Royal Mail and the business agreement that it chooses to make is different from the IBA that we were considering, which concerned sister companies within the Royal Mail Group. In the 2009 Bill, we had always intended to keep Royal Mail in majority public ownership, so that link would have remained, but it certainly will not do so in the new scenario that the Minister envisages when this Bill is enacted.

Edward Davey: With respect, I am not discussing the IBA; I am discussing the legislative protections and requirements on access points, which are stronger in this Bill than they were in the 2000 Act. I am simply asking her to admit that we are strengthening the regulatory framework.

Nia Griffith: I do not want to pre-empt later discussion on the nature of access points, but my point concerns using post office branches as access points. We shall discuss later the type and range of such points, and what we want from the consumer point of view.

Edward Davey: Again, I am trying to be constructive—post offices already count as access points.

Nia Griffith: We want the Bill to state that post offices will be used as part of the Ofcom choice of access points that are used by the universal provider of the universal postal service.

Gregg McClymont: Access points are considered part of the universal postal service in clause 28, but they are not included in the list of minimum requirements in clause 30, so there is no mandatory requirement for them to be included to any extent.

Nia Griffith: I do not wish to repeat what the Minister has, rather derogatorily, called the musty amendments—I do not know whether you have been told about that, Mr Amess, but he named them that because we wanted to change the words “may” to “must”. That will be one of the problems when we consider what the regulator can and cannot do with regard to access points. I will be delighted if the Minister has found something with a “must” in it in relation to access points.

Edward Davey: This may be a willy point, because under requirement 2(2) in clause 30 there is a reference to access points, which the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East has clearly missed. He is therefore in danger of—I will not say misleading the Committee—giving a wrong interpretation of the legislation. He fails to admit that clause 28(4) makes it absolutely clear that when Ofcom is carrying out its duty to secure the provision of universal service, it must secure the provision of sufficient access points. It could not be clearer; it is in the legislation—I wish he would read the legislation.

Nia Griffith: I will come on to clause 30, and I do not wish for the Minister to have to listen to that twice. The issue with clause 30 is on the collections from those access points. It is about collection rather than the access points themselves and about how frequently collections may take place. Those are the inputs of these clauses, so we will return to that later.
Let us get back to the actual idea of the post office network as an access point, because I am sure that the Chair would like me to move on to amendments 78 and 89. We have said a considerable amount about amendments 74 and 75.
Amendment 78 inserts into clause 30 new requirement 3A, which would cover access to postal services via the post office branches. The reason for this amendment is that, as they stand, the requirements of clause 30 do not provide for that particular item. They may provide for collection from access points, but they do not provide for post office branches to be those access points. We have tabled amendment 78 with the same aim as amendment 74. The purpose of the amendment is to enshrine in legislation the requirement that Ofcom should include post office branches as access points to the services of the provider of the universal postal service, which at the moment is Royal Mail.
The purpose of amendment 78, as with the previous amendment, is to find a way in which people can be certain of being able to use the post office network to access the services of the universal service provider. This is not about saving post offices for post offices’ sake; this is about the consumer. This is about people being able to go somewhere local and not having to go into the middle of a town 20 or 30 miles away. Put simply, they should be able to go to their local post office to post a package or register a letter.
In this instance, it is about not only enshrining in legislation the principle that the post office network should provide access points, but giving the Secretary of State the power to specify exactly how many access points there should be. The reason for that is, as has been suggested, a universal service provider might think that its needs could be served by a network of some 4,000 outlets. Currently we have 11,900 post offices. Of that number, perhaps 7,000 or so would be adequate to meet the access criteria that were introduced by the previous Labour Government and, as I have said, have been accepted by the Government and restated in their recent document on the future of the post office network in the digital age.
Those access criteria clearly state that, nationally, 99% of the population are to be within 3 miles of the nearest outlet, and 90% are to be within 1 mile. In deprived urban areas, 99% are to be within 1 mile. Some 95% of the total urban population are to be within 1 mile, and 95% of the total rural population are to be within 3 miles. Overall, 95% of people in each postcode district are to be within 6 miles.
Obviously, the purpose of those access criteria is to ensure reasonable access to post offices in both urban and rural areas. Without the criteria, there would be no control of the overall shape of the post office network. We believe that a viable, sustainable post office network is a critical part of the social infrastructure for many communities. We introduced the access criteria to ensure that such communities would continue to be fairly served by a national post office network.
As I have said, the access criteria could be met with a network of some 7,000 post offices, but we made additional investment to keep open 11,900. If the Government are serious about keeping open that number of post offices and about keeping the network as we know it now, here we have a mechanism that they could use. The Secretary of State would have the power to specify the number of post offices to be used as access points to the services of the provider of the universal postal service.
The Minister may argue that it is up to the privatised business to decide what it does, how many access points it uses and where those access points are located. Here, we are talking about a national network; it is a universal service, which we want to be easily accessible for everybody in the UK. Given that all parties now agree on the access criteria for post offices, the Secretary of State should have the power to specify that the provider of the universal service should use post offices as access points, as well as how many post offices that should be, and I can see no good argument against that.

Gregg McClymont: I am interested in my hon. Friend’s points on the criteria for access points and counter services. Does she agree that when the Dutch and Germans privatised their mail services, they wrote statutory protection into law simply because they did not want the privatised entity to make profits at the expense of keeping a full post office network?

Nia Griffith: It is helpful to have that spelled out. One cannot imagine any rational person who would not want that to be the case, but it seems that we are still not getting any indication from the Government that they understand the nature of the problem.
To return to the point about the Secretary of State, if the Government are serious about protecting the post office network, the straightforward solution would be for the Secretary of State to have and exercise such powers. What is the point of using large amounts of taxpayers’ money to subsidise the post office network, if everything in our power is not done to secure the most obvious source of income for the post office network, which is the work involved in providing access points to the universal postal service? It seems positively perverse not to do that, when such powers could so easily be there. Other countries, as my hon. Friend has mentioned, have no such hang-ups about not letting the Government have a say in this. Elsewhere, where there has been privatisation of the mail service, there has also been legislation to protect the post office network and to specify its use for the access points for the universal postal service.
While we do not want to see the privatisation of Royal Mail services, if it is going to happen, what on earth is wrong with including a mechanism to protect the post office network in the legislation? That is clearly what the overwhelming majority of the public want to see. Most people cannot imagine that the situation would ever be any different. The Government specify all sorts of regulations that private providers have to comply with—I am sure that the hon. Member for Bedford would love to regale us about some of those, and there are many. Look at the various schemes that the energy companies are expected to participate in; there is nothing wrong with a specification in that respect.
I feel that the Government are being obstinate and not listening to the public, while refusing to take the necessary steps to secure the post office network’s future. This is the ideal opportunity for the Secretary of State to specify the use of the post office network and to stipulate a minimum size for it. The alternative outlook is very bleak indeed. We have been told that nothing can be done about an IBA—the Minister has said so—because it will be a private commercial matter. Therefore, sub-postmasters and other Post Office employees are supposed to hope that Royal Mail will want to use the post office network.
There is absolutely no sign yet that there will be anything like the guarantee of a 10-year IBA, or of any continuation after the current IBA expires. Even if the Royal Mail decides to use the post office network, what is to stop it from negotiating a much reduced IBA? The Royal Mail could decide that, in the interests of cutting costs, it prefers to have a much smaller network, and it could therefore choose to use only a certain number of post offices as its access points—if it even chooses to have post offices as preferred access points.
This issue presents the ideal opportunity for the Minister to secure the future of the post office network, so I ask him to look favourably on our amendment. He should support the post office network; rejecting the amendment will send a clear signal out, not only to all who work in the post office network but to the many people in our communities who use it, saying that the Government do not care if post offices survive or not.
Amendment 89 would insert the words,
“including those provided by a Post Office Company”.
Clause 35(2)(b) would then read:
“to provide…access points for the purposes of a universal postal service, including those provided by a Post Office Company”.
It should be clear that amendment 89 is simply in keeping with the amendments that I have already discussed. It is about enshrining in legislation the role of post offices as access points for the universal postal service. I want the Minister to explain why he is so busy moving around the decorations on the top of the cake without actually having a cake to start with. He needs to take this seriously and to find a mechanism. That is a mechanism, and if he does not like it, perhaps he could come up with a better one that would actually guarantee Royal Mail business for the post office network.

Karl Turner: I rise to support the amendments in the names of my hon. Friends.
We have heard evidence from both Ofcom and Postcomm, and it is accepted that Ofcom will be the vehicle for the regulation of the privatised Royal Mail. However, the apparent agreement does not mean that proposals, as they stand, are perfect. Effective regulation is vital, especially when we bear in mind that the Bill takes a publicly owned company and makes it subject to 90% privatisation with 10% employee mutualisation, which is effectively complete privatisation. We must, therefore, ensure that the legislation gives Ofcom the necessary tools to be able to regulate a privatised Royal Mail not only in the market interest, but in the public interest.
The privatisation proposal is set against a backdrop of regulatory uncertainty. Postcomm is reviewing and reforming its practices, and the handover to Ofcom will naturally provide some challenges. If we add the uncertainty arising from the Postcomm review and the vagueness of what the private versus public share of Royal Mail will be following the sale, we can all agree that it is quite a task for any regulator to undertake.
That emphasises two points. First, as I have alluded to previously, the Bill is being introduced—in much the same way as the Government’s agenda for reducing the deficit—too soon and too fast. I urge the Minister to slow down and review the Royal Mail’s position following modernisation and regulatory review.
Secondly, bearing in mind the uncertain territory that we find ourselves in, we must ensure that the Bill is watertight in guaranteeing that the universal service obligation and the Post Office will be protected in the interests of consumers. Ensuring that the universal service obligation is protected is what motivates my objection to subsection (3) and is the reason why I firmly support amendment 73. The Bill, as it stands, specifically states that Ofcom must have regard to the universal postal service’s financial sustainability and efficiency.
Why is there no mention of the public service element of postal services? Why do the public not have express protection in the Bill? A privatised Royal Mail will clearly be delivered and regulated according to profit and loss, and the consequences of that have no boundaries. I do not consider that suggestion as completely out of the realms of reality. On the contrary, it seems more like a business reality that any business would take in the interests of its shareholders. Subsection (3) guarantees that Ofcom’s regulation will be driven by profit and loss, and, without a firm provision to protect it, the universal service obligation will become a victim of the accountant’s pen.
More stringent regulation is vital to protect both the universal service obligation and our post offices. The Government seem to have an unbridled belief that the USO will be safe in private owners’ hands. However, we only have to look to the Netherlands to realise that that might not be the case. Within a year of the mail market being fully opened to competition in April 2009, the managing director of TNT’s European mail network, Mr Kunz—I have struggled to pronounce his surname—has said that the universal service obligation was
“a kind of Jurassic Park and we should get rid of it”;
I have the page of the journal where it was reported, should the Minister wish to have a look. The company now plans to move towards a three-day delivery week, claiming that it would not finance a six-day week.
I fear that the universal service obligation is not sufficiently protected by the Bill. When instructing Ofcom, the Bill expressly points to financial sustainability and efficiency without taking into account larger considerations, which puts the USO at risk. That obligation is vital to many groups, and once again I would like to consider small-business owners.
Last night, Neil Haylock, who owns a small business in my constituency, shared his genuine concerns. He thinks that his business would suffer as a consequence of the Bill. The mutual relationship between Royal Mail and small businesses is important—they depend on each other. The research undertaken by the Federation of Small Businesses shows that a large majority of small businesses use stamped mail and are regular users of post offices. Exposure to market conditions and ineffective regulation will hurt small-business owners. The pressures of unrestrained competition will result in a diluted universal service obligation. There is a real chance that the obligation will become nothing more than a “Jurassic Park” relic.
Small businesses rely on the universal service obligation, access points and the footfall created by post offices on the high street. Those businesses are the key drivers for growth in our economy, and it is vital at this time that they receive all the support that they need. The Government should be helping, not harming, them. They need to grow and innovate rather than change their business models to compensate for a diluted universal service obligation and a change in the provision of post office services. The Government have not thought through the impact of the Bill on all members of our communities, who, without strong protection for the USO, will be damaged.
It is vital that the link between Royal Mail and the Post Office remains. The inclusion of post offices in the Royal Mail Group is historic, and ensures a synergy between delivery and collection, leading to an effective service. As illustrated by my hon. Friend the Member for Llanelli, the idea of separating the Post Office from the Royal Mail is such an outrageous thought that Government Members have convinced themselves, I think, that the Bill will not do that, but one wonders whether they can see the wood for the trees. The link between the two is ensured by entering into a contract that confirms that the Post Office is to be the primary retailer for the Royal Mail. That guarantees one third of the Post Office’s business. Without that income, there will be closures and substandard service. That contrasts starkly with the current position, in which post offices are given the security of contracts with Royal Mail. The Bill does nothing to guarantee the inter-business agreement, which the Post Office so heavily relies on.
A privatised Royal Mail will renegotiate existing contracts in an effort to reduce costs, and if a cheaper alternative is found the Post Office will, in my view, be dropped more quickly than the Liberal Democrat manifesto promises and pledges.
Opening up Royal Mail to the brute force of private markets will create a situation where financial considerations squeeze out social consequences and that is nowhere more true than with regard to Post Office contracts. As an IBA between Royal Mail and Post Office Ltd cannot be placed in legislation as it is a contractual agreement, the Government have not managed to find another solution that ensures that the future of the link between Royal Mail and Post Office Ltd is protected. Amendments 74 and 75 offer the Minister a solution to that problem and guarantee that the historic link between Royal Mail and Post Office Ltd will remain.
By accepting these amendments we can make certain that Ofcom is obliged to protect post offices by including them as access points. The amendments will ensure the long-term future of post office branches, a future that is free from the threat of the ever-changing nature of a private company. Post offices will be secure regardless of the intentions of the management at a privatised Royal Mail. Unless the Minister’s intention is to see the link broken I can see no reason why he and Government Members should not support these amendments and guarantee the future of the post office network.
Rejecting the amendments sends a message to all post offices that a privatised Royal Mail may move away from using them and may find alternatives for access points. Alternatively, if the Minister wants to stand up for post offices, to guarantee their future and to put their minds at rest, he should support these amendments and encourage his hon. Friends to do the same. It is vital that the Minister considers these amendments. He should not leap to his feet and begin by customarily christening amendments in his rather tiresome way.
To ensure that the regulatory framework laid out in the Bill is strong enough to protect the service that so many of our constituents rely on, whether it be small and medium-sized businesses or those that rely on the services—and when I talk of services I mean full services—decisions about Royal Mail cannot be taken solely in relation to profit and loss with no consideration of the social and economic impact. If the Minister chooses not to take these amendments on board the Government may not be forgiven by the consumers.

Gregg McClymont: I rise to discuss amendments 74, 75, 78 and 89. Amendment 74 would make it clear that Ofcom should include post office branches as access points. Amendment 75 would make it clear that access points include post offices. Amendment 78 would mean that the universal service provider must be in compliance with a universal postal service order under clause 29 and provide a universal service in compliance with clause 30. The amendment includes post offices to be set in regulation laid before Parliament by the Secretary of State. Amendment 89 refers to the universal service conditions to be set by Ofcom under clause 35 and would add access points
“provided by a Post Office Company”.
Currently the minimum set of universal services does not include post offices. That would seem strange. As we know, other countries include collections and deliveries on the one hand, and access points, counter services and post offices on the other, as part of the universal service obligation. The Dutch and the Germans are the two prominent examples. Why do they do that? They do it because it is vital to do so when a mail service is privatised; otherwise, the obvious way for executives of a newly privatised mail service to make cuts and to maximise their remuneration and bonuses is to cut costs. A simple way to cut costs is to cut the number of post offices for which Royal Mail will have to pay.
I say that it seems strange not to include post offices, but it is only strange if we think that one of the objectives of the public authority is to set the level of public service, because that is what we are talking about here; there is a tension between a commercial imperative and a social utility. It is not strange if someone thinks that the Government’s objective should be to sell any assets for the highest possible price. This is where I may be able to add to what my hon. Friend the Member for Kingston upon Hull East said. I do not think that the Minister wants the Post Office network to decline—not at all—but he finds himself in a situation where the intention is the objective of keeping a Post Office network and that objective is in tension with the imperative to get a decent sale price for Royal Mail. That is where the tension lies.
I would say that the whole of the Bill is deliberately structured to alert potential buyers of Royal Mail to the fact that post offices are expendable and therefore that potential buyers should take that into account when bidding.
Let me enumerate the way that the Bill seeks to avoid protecting post offices. First, the definition of access points does not include post offices. Secondly, when Ofcom looks at determining—

Edward Davey: I reassure the hon. Gentleman now, before I do so again later, that everyone understands that the definition of access points in the clause does include post offices. So, on that first point, may I reassure him that he should have no concerns?

Gregg McClymont: I suspect that we will come back to that point, and I thank the Minister for his intervention.
Secondly, when Ofcom looks at determining the USO it must prioritise the financial needs of the USO provider, which is what we discussed earlier when we debated amendments 73 and 76 to clause 20.

Edward Davey: That is incorrect. The clause does not refer to the financial needs of the USO provider; it refers to the financial sustainability of the USO provider. That is very different.

Gregg McClymont: Clause 28(3) states:
“In performing their duty under subsection (1) OFCOM must have regard to—
(a) the need for the provision of a universal postal service to be financially sustainable, and
(b) the need for the provision of a universal postal service to be efficient.”
If that does not give Ofcom an imperative to consider the financial health of the USO provider, then I do not know what would.
Does the Minister want to intervene again? He seems rather exasperated. [Laughter.]

Edward Davey: I was not exasperated. I was really grateful to the hon. Gentleman for reading out those two paragraphs of clause 28(3), because they confirm what I had said and they argue against what the hon. Gentleman himself had said.

Gregg McClymont: As I was saying, let me enumerate the ways in which the Bill seeks to avoid protecting post offices.
Thirdly, if the Secretary of State considers that Ofcom is still too generous, having taken into account:
“(a) the need for the provision of a universal postal service to be financially sustainable, and”—
as the Minister said—
“(b) the need for the provision of a universal postal service to be efficient”,
the Secretary of State can direct Ofcom to reduce the services in the USO at his complete discretion.
We discussed that point earlier and the Secretary of State gave me the reasonable response that the discretion is included for other, narrowly focused reasons. It is essentially to stop Ofcom imposing requirements on partial companies.
I accept that that is what the Minister intends but the way it is written means that it can be used more broadly, not by a Secretary of State as honourable as the current one but by a Secretary of State in a different set of political circumstances.

Edward Davey: To reassure the hon. Gentleman on that point, clause 29(5) refers only to the first universal service order.

Gregg McClymont: That is somewhat reassuring, but in the context of the first universal postal service order it means that the Secretary of State can exclude services from the universal service.
This is not necessarily a partisan point, because I suspect that the previous Government performed a similar rhetorical trick—if indeed it is a trick—but the Government have said frequently in Committee, “We have good intentions, and we will not do this. Trust us; we are good guys.” I prefer to have details in statute, however. This may be the pessimism of the intellect that Gramsci famously wrote about, but I prefer to have the good intentions of the Secretary of State in statute. I have asked the Minister whether he has read “Politics as a Vocation,” because it is very clear that good intentions do not matter; consequences matter. As the clause is written, the Secretary of State can exclude services from the universal service but he cannot add them. That point is worth considering.
In introducing the Bill, the Secretary of State made much of the fact that a review of the universal service would be subject to parliamentary affirmation. Ofcom is not required, however, to conduct such a review prior to the first universal service order. In addition, as I have said—I suspect that an intervention is coming from the Minister—clause 30 does not refer to access points. It is worth considering that there is no parliamentary approval relating to post offices.

Edward Davey: The hon. Gentleman has requested an intervention, and I do not want to disappoint him. In clause 30, requirement 2 specifies:
“At least one collection of other postal packets every Monday to Friday from every access point in the United Kingdom used for that purpose.”

Gregg McClymont: I am not a lawyer, but as far as I can see the requirements are the delivery of letters or other postal packets; the collection of letters or other postal packets; service at affordable prices in accordance with uniform public tariff; a registered items service; an insured items service; services to blind or partially sighted; and legislative petitions and addresses. I cannot see access points in that list of requirements.

Edward Davey: No constituent has ever talked to me about an access point. They have talked to me about where their mail can be collected from—letterboxes, post offices and so on—and requirement 2 deals with collection of letters or other postal packets. In other words, it is written in phrases that constituents might use. Access points are referred to elsewhere in requirement 2:
“At least one collection of letters every Monday to Saturday from every access point in the United Kingdom.”
I do not quite know what we have to do for the hon. Gentleman; he needs to read the Bill.

Gregg McClymont: I would be delighted if the Minister would put into statute provision for access points, and statutory criteria for access points. I take his point; I will go away and look at it, and I will come back this afternoon. I am not a lawyer, and I am fairly sceptical of how things are written in such Bills. There often seems to be wriggle room and unintended consequences.

Damian Collins: Respecting the fact that the hon. Gentleman is not a lawyer—neither am I—does he agree that the difference between the German postal network, which I know he has made some study of, and the British network is that the private leadership of the German network is investing in expanding its network and access points, rather than retracting them?

Gregg McClymont: Danke schön. The hon. Gentleman may be right—the German network may be expanding and it is an effective service, but there is statutory protection for access points at its 12,000 post offices. Does he not support statutory provision for post offices?

Damian Collins: If the German network has only 12,000 post offices for a population of 80 million, they have a considerably lighter post office network than we have in this country. I hope that we maintain ours at that higher level.

Gregg McClymont: Again, that is a fair point, but statutory provision is important. This is not an easy issue. The Minister has a difficult task, because technology and how people live their lives has made the services less heavily used. There is also the political dimension, because a Liberal Democrat will have made much of his career on tuition fees and post offices, but there are now difficulties in both areas. I do not mean that as a partisan point. I have some knowledge of the hon. Member for East Dunbartonshire, and she has campaigned on those issues very effectively in the past.
It is a difficult issue. The hon. Gentleman made a fair point on Germany having 12,000 post offices for 80 million people, but I would be delighted to see statutory provision for post office numbers in the UK, because it would give important reassurances to consumers. The Minister’s optimism on the future of the post office network is exhilarating in some ways. If he is so confident, I cannot see any reason why he would oppose writing into statute the informal access criteria that we have currently. I suspect the answer is—this is not a criticism of him, because politicians have to deal with competing imperatives—that if the Government want the money for the Royal Mail privatisation, they have to make it worth the bidder’s while. That is why the Minister is uneasy about writing statutory provision. 
To protect the post offices, the Minister should create a regulation that defines the level of service, such that the informal Government access criteria are maintained and, consequently, so is the overall number of post offices. If the Minister genuinely believed his claims that a purely commercial relationship between Royal Mail and the Post Office would deliver that, he would have no reluctance in doing so. If he is right, it would make no difference to the commercial reality and would have the benefit of reassuring all stakeholders, because they would have the best of both worlds.
The Minister has stated on a number of occasions his confidence that something like the IBA will continue after privatisation, when Royal Mail and Post Office Ltd will be separate companies. He has also noted statements from senior Royal Mail management to that effect—statements that we heard in evidence. What do those statements amount to? They amount to good intentions and rhetoric, as opposed to something that we can hold on to and grasp firmly—that is, statutory protection. The Minister admits that he has never seen the IBA and that he will not see any future iterations of it. He says that he does not know to what extent its terms can be changed in accordance with the contract, and that no Secretary of State or Minister would. In any event, the IBA could be renegotiated at any point following privatisation, to the detriment of Post Office Ltd. It happens all the time in the commercial world.
The Minister’s response to such an argument is to say, “Well, Post Office Ltd will be in a strong bargaining position.” As the Committee may know, I do not think that Post Office Ltd vis-à-vis Royal Mail will be in a position of any strength in a commercial negotiation. As we know from an answer that the Minister gave us the other day, Post Office Ltd is one tenth of the size of Royal Mail. It is dependent on securing Royal Mail’s contract for counter services. After the separation of Post Office Ltd and Royal Mail, any agreement between the two organisations will be purely commercial as Royal Mail seeks profits and dividends. Bearing down on suppliers such as Post Office Ltd will be inevitable and natural for a privatised Royal Mail, which will also be working to cut costs. That is what business does, and rightly so. It is also worth considering that the bonuses of most of the senior executives—again, it is the way of the world—will be dependent on cutting Royal Mail’s costs.

Robin Walker: Will the hon. Gentleman accept that Royal Mail as a private company will also want to grow markets, as well as cutting costs? We have heard a lot of evidence about the growing importance of the parcels and packaging business. The post office network provides a vital route into that business, which our constituents use very heavily. The post office network will have a strong negotiating position owing to its importance for that vital growth market for Royal Mail.
When we consider the interests of a privatised Royal Mail and the executives, most of whom hope to go to a privatised Royal Mail, we must treat their words with caution. The Minister insists that statutory protection for post offices is unnecessary. We have heard that that is not an approach taken in other countries. When the Dutch and Germans privatised their post offices, they provided statutory protection, because they did not want the privatised entity making profits by cutting the post office network, which is an obvious way to do so. No one is criticising the privatised entity for wanting to do that; it is what private companies do in the commercial sector, as they have a legal duty to maximise shareholder interest. The question is how to frame regulation so that those natural imperatives of the privatised entity are constrained.

Damian Collins: I respect the hon. Gentleman’s point, but the danger with his great concern—I am sure that it is not a party political concern about privatisation per se—is that it suggests that all private companies do is cut to make profits and that they never innovate. It would be rather like a debate on telecoms privatisation—I have not checked Hansard to see whether that was debated in Committee—in which the only concerns were about cutting call boxes and the time it takes to install new lines, which would now seem totally archaic arguments.

Gregg McClymont: That is a fair point, but if a privatised entity is looking to cut costs as well as to invest, an obvious place to start is the post office network, in which 8,000 of the 12,000 branches are unprofitable, and we might not have reformed corporate governance by that stage. I hope that the hon. Gentleman agrees that the post office network seems an obvious place to start for a privatised entity that is looking to create a leaner and more profitable business, but I take his point about investment.
I have made this point in an intervention and so will not labour it, but I think that the reason why the Minister is so reluctant to insert statutory criteria for access points, by taking the informal criteria that previous Governments have worked from and putting them into the Bill, is not that he has some desire to—

Edward Davey: I am sorry to interrupt, but the hon. Gentleman keeps referring to the access criteria as informal criteria. They are legally binding and set out in a contract, which is hardly informal.

Gregg McClymont: Will the Minister expand on what he means by that? Which criteria are legally binding in the contract?

Edward Davey: When the Government provide funding for Post Office Ltd, they enter into a contract for what Post Office Ltd will deliver for that funding. We have announced £1.34 billion of funding over the next four years and have a detailed contract with Post Office Ltd for what it will deliver for that funding, which includes a post office network of at least 11,500 post offices.

Gregg McClymont: I thank the Minister for elaborating on that point, which is important because it brings us to the concern underpinning our position. He is right about the contract with POL, but his gamble is that he can turn around the post office network and the 8,000 economically unviable post offices and make them profitable, with post office local and the other innovations with which he is associated. That is an admirable aim, but I am sceptical.

Edward Davey: I have made it clear that there is no long-term intention to remove subsidy totally from the post office network. We understand that there will always be some remote, rural post offices that are unlikely to become commercially viable. We have made it clear time and again that we recognise the social importance of the post office network and so expect that for the foreseeable future there will have to be some sort of subsidy and, therefore, some sort of payment between the Government and Post Office Ltd. I intend to say more on that in my remarks on what might happen if every single post office became financially viable in its own right and how I believe we could still make protections in that case.

Gregg McClymont: I thank the Minister for elaborating further. According to his remarks, about a third of Post Office Ltd’s funding comes from the IBA, and other moneys come from subsidy and from whatever is generated in revenue. He has rightly referred to the fact that the Government currently have a contract with POL, but my worry is about what might happen in future. It is a gamble, and one that the Minister has to make, certainly in terms of trying to generate more revenue. His gamble is that we can put £1.3 billion in, and I am sure that he would admit that not all that will be subsidy. The pie chart showed that about 48% of it was going to be subsidy, so what is that? My maths is not very good, but it will be about £650 million in subsidy, with the rest supplied in various ways, including the roll-out of the new services.
Even a partial success would be a huge success, given the technological changes, the different ways in which people live their lives and the challenge of trying to get the Government to do everything through the Post Office—it was pointed out earlier that that is like the previous Government, which is a fair point. Unless the Government are prepared to have the maintenance of the post office network as a strategic imperative in everything that they do, even if that comes at the expense of efficiency because things can be done quicker online, the Post Office is in a difficult position. I suspect that that is what happened under the previous Government. Although I was not in the previous Government—I was not even an MP—I suspect that there were cheaper ways to do things.
Sir Philip Green provided the Government with a report on efficiency. Being a businessman, he suggested that such a massive organisation—the biggest—needed to use its bargaining power and squeeze suppliers down. He spoke about operating like a business. If the Government operate like a business, they will not put services through the post offices, because there are other, cheaper, ways of doing things. Perhaps the Government have a social dimension.

Edward Davey: I am grateful to the hon. Gentleman for giving me a chance to further explain our post office policy. We take a rather different approach to providing Government services through the post office network from that of the previous Government, when Ministers from the Department for Business, Innovation and Skills simply defended the status quo. We think that if Departments want to be more efficient, make savings in processing or other public services and introduce online services, they should be encouraged to go ahead. Those people who cannot go online should think of using the post office network. That is a completely different, 21st-century approach that helps Departments to make savings while ensuring that Government services are accessible to all citizens, and it is why we have a better chance of success than the previous Government.

Gregg McClymont: More people are going online all the time. I took the Minister to mean—he will correct me if I am wrong—that although many people carry out transactions online, the post office will provide services for people who do not. Is that a fair assessment? The problem with that approach is that it is a declining share of the market, and the number of people who are not online will go down and down. Even my mother, who is 70, has started doing things online. My father is nearly 90, and he has not. Perhaps this is about 90-year-olds. All jokes aside, my point is serious.

Edward Davey: The hon. Gentleman makes a valid point, and I am glad that he is dealing with the impact that new technology is having on the markets. He is right that it is a challenging problem, and I have made no secret of the fact that sorting it out will require a range of approaches. For some Government services, however, even those who do almost everything online will need to use the post office. The policy statement makes it clear that we wish to see the post office network positioned to deal with things such as identity verification, which will be required to help people digitally access more Government services.

Gregg McClymont: The Minister has real enthusiasm for trying to roll out services to the post office network. However, to use one of his words, a lot of it is “musty”—we must do this, but are we going to? We are dealing with a declining part of the population that transacts business offline. The Government will provide a subsidy and have a contract with Post Office Ltd to provide services. However, what happens if the Minister’s laudable attempts fail to turn round those 8,000 post offices, which is two thirds of the network? Even if he partly succeeds, he will still fail. Unless he can turn round 8,000 post offices, there will be a gaping hole at the heart of Post Office’s revenue. That is where the IBA becomes important. A third of any business’s income is important, but this case is particularly important, because five years down the line, the Minister might have rolled out some services.

Edward Davey: The hon. Gentleman is in danger of obscuring the point. The IBA is related to mail services. As the Committee knows from the evidence session, part of the challenge in the digital era concerns the reduction in mail services.

The Chairman adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at One o’clock.